Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2013:2:
A Competitive Partnership Formation Process

Tommy Andersson (), Jens Gudmundsson (), Adolphus Talman () and Zaifu Yang ()

Abstract: A group of heterogeneous agents may form partnerships in pairs. All single agents as well as all partnerships generate values. If two agents choose to cooperate, they need to specify how to split their joint value among one another. In equilibrium, which may or may not exist, no agents have incentives to break up or form new partnerships. This paper proposes a dynamic competitive adjustment process that always either finds an equilibrium or exclusively disproves the existence of any equilibrium in finitely many steps. When an equilibrium exists, partnership and revenue distribution will be automatically and endogenously determined by the process. Moreover, several fundamental properties of the equilibrium solution and the model are derived.

Keywords: Partnership formation; adjustment process; equilibrium; assignment market; (follow links to similar papers)

JEL-Codes: C62; C72; D02; (follow links to similar papers)

18 pages, February 4, 2013

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This paper is published as:
Andersson, Tommy, Jens Gudmundsson, Adolphus Talman and Zaifu Yang, (2014), 'A Competitive Partnership Formation Process', Games and Economic Behavior, Vol. 86, pages 165-177

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